Operation Storm Tide 3 took place at Ostend in Belgium, ahead of the UEFA football tournament that kicks off on Friday in Paris,'Sunday Express' reported.
"This exercise was focused on preparing and rehearsing our response to an attack in respect of the pending Euro championships. The Euro 2016 games have been flagged up as potential targets for Islamic State," a military source told the newspaper.
Soldiers from 40 Commando and troops and special forces from Belgium and Holland stormed a shopping centre and "eliminated" a group of soldiers playing the part of extremists threatening to blow up the building as part of the training exercises.
Planned by Nato and approved by UK defence secretary Michael Fallon, the operation involving more than 800 troops is one of several set to take place across Europe this summer.
Intelligence chiefs fear militants are planning "a summer of carnage" after retrieving data from the laptops and mobile phones of terror suspects Mohamed Abrini and Salah Abdeslam.
He and Abdeslam are accused of being involved in last year's Paris atrocity, in which 130 people died.
American intelligence believes Paris, Cologne and Moscow could be targeted during the tournament. They fear an attack on London is being primed to coincide with an England game.
The news comes after the US warned its citizens on Tuesday of possible terrorist attacks in Europe.
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